Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis

A robust optimal control of discrete time Markov chains with finite terminal T and bounded costs or wealth using probability distortion is studied. The time inconsistency of these distortion operators and hence its lack of dynamic programming are discussed. Due to that, dynamic versions of these ope...

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Autores principales: Uğurlu, Kerem, Brzeczek, Tomasz
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Berlin Heidelberg 2022
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9734642/
https://www.ncbi.nlm.nih.gov/pubmed/36531521
http://dx.doi.org/10.1007/s10100-022-00834-0
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author Uğurlu, Kerem
Brzeczek, Tomasz
author_facet Uğurlu, Kerem
Brzeczek, Tomasz
author_sort Uğurlu, Kerem
collection PubMed
description A robust optimal control of discrete time Markov chains with finite terminal T and bounded costs or wealth using probability distortion is studied. The time inconsistency of these distortion operators and hence its lack of dynamic programming are discussed. Due to that, dynamic versions of these operators are introduced, and its availability for dynamic programming is demonstrated. Based on dynamic programming algorithm, existence of the optimal policy is justified and an application of the theory to portfolio optimization along with a numerical study is also presented.
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spelling pubmed-97346422022-12-12 Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis Uğurlu, Kerem Brzeczek, Tomasz Cent Eur J Oper Res Article A robust optimal control of discrete time Markov chains with finite terminal T and bounded costs or wealth using probability distortion is studied. The time inconsistency of these distortion operators and hence its lack of dynamic programming are discussed. Due to that, dynamic versions of these operators are introduced, and its availability for dynamic programming is demonstrated. Based on dynamic programming algorithm, existence of the optimal policy is justified and an application of the theory to portfolio optimization along with a numerical study is also presented. Springer Berlin Heidelberg 2022-12-09 /pmc/articles/PMC9734642/ /pubmed/36531521 http://dx.doi.org/10.1007/s10100-022-00834-0 Text en © The Author(s) 2022 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) .
spellingShingle Article
Uğurlu, Kerem
Brzeczek, Tomasz
Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title_full Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title_fullStr Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title_full_unstemmed Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title_short Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
title_sort distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9734642/
https://www.ncbi.nlm.nih.gov/pubmed/36531521
http://dx.doi.org/10.1007/s10100-022-00834-0
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